Punch Taverns, formerly of the FTSE 100, has seen its share price drop by 80 per cent from last summer’s high. An unscheduled trading statement from the pub group last week failed to halt the decline and the further presentation was presumably designed to assuage fears about the company’s financial position.

The group is a victim of the reversal in attitudes to leverage since the credit crunch hit. Punch has used the reliable cash flows generated by rent from pubs on long leases to take on a huge amount of securitised debt. Net debt to forecast earnings before interest, tax, depreciation and amortisation is 7.7 times. This debt is all long-term, with the interest fixed. Repayments are spread over two decades, and only a small amount needs to be refinanced in two years’ time. But conditions (distinct from, and less onerous than covenants) attached to parts of the debt mean that a moderate fall in ebitda could force Punch to hoard cash.